Can Apple Be More than Just the iPhone?

Onstage at an Apple event last month, C.E.O. Tim Cook revealed a handful of new products: a new device—the iPhone SE, a smaller version of its trademark phone—a brand-new iPad Pro, and new colors and watchbands for the Apple Watch. Today, there are about 1 billion active Apple devices in use, the sales of which provide the majority of the company’s revenue. But according to a new note by Credit Suisse, published Monday, Apple’s real value is in its huge customer base.

With an estimated 588 million users, Credit Suisse says, device sales alone aren’t Apple’s biggest opportunity—services are. Apple already has a number of its own services available—things like the App Store, Apple Maps, iTunes, iCloud, and Apple Pay. The company saw profits from its services go from $3.2 billion in 2010 to $14.5 billion last year, driven by downloads and installations. And there’s still room to grow: according to the investment bank’s analysts, revenue from Apple services will generate $53 billion in revenue by 2020.

These services, Credit Suisse says, could warrant a higher valuation for the the world’s most valuable company. Cloud services alone are a $110 billion market, and Apple is reportedly already shifting from outsourcing its cloud infrastructure to Amazon, Google, and Microsoft to an internal project code-named McQueen that would help break its reliance on other cloud providers by creating its own platform.

More important, Credit Suisse’s note comes amid a debate over what kind of company Apple is becoming. Historically, Apple has been known for its innovation of new devices and product categories. But recent product announcements—the new, smaller iPhone SE and the new iPad Pro, for example—aren’t new products; they’re just modified versions of existing Apple devices, prompting another round of worrying that Apple’s hot streak may be over. By expanding its services, and placing itself in more direct competition with rivals like Amazon and Google, Apple may be able to continue to reinvent itself and innovate, and avoid turning into another creaky, monolithic tech company.